Accounting for Decision Making
Textbook Exam Questions
Course Introduction
Accounting for Decision Making is designed to equip students with the essential accounting knowledge and skills necessary for effective managerial decision-making. The course emphasizes the interpretation and analysis of financial information, focusing on how accounting data can be utilized to make informed business decisions. Topics include cost behavior, budgeting, performance evaluation, and relevant costing for decision making. By integrating real-world scenarios and case studies, students learn to apply accounting concepts to planning, controlling, and evaluating organizational operations, thereby supporting strategic and operational choices within a business context.
Recommended Textbook
Atrills Accounting for Business Students 1st Australian Edition by Atrill McLaney
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14 Chapters
893 Verified Questions
893 Flashcards
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Page 2
Chapter 1: Introduction to Accounting
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Sample Questions
Q1) The most complete description of the planning process for a business is:
A)setting objectives and short-term plans.
B)setting objectives, long-term plans, and short-term plans.
C)setting objectives and detailed budgets.
D)setting long-term objectives and long-term plans.
Answer: B
Q2) Knowledge of the objectives or mission of a business will be most useful in assisting users of financial reports in understanding:
A)the liquidity position of the business.
B)why it is taking longer than it should to collect money from accounts receivable.
C)the financial reporting cycle.
D)what the business is trying to achieve.
Answer: D
Q3) Which of these is an accounting entity?
A)Sole proprietor
B)Partnership
C)Company
D)All of the above
Answer: D
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Page 3
Chapter 2: Measuring and Reporting Financial Position
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Sample Questions
Q1) Identify the asset.
A)Bank overdraft
B)Plant and equipment
C)Loan from ABC Ltd
D)Accrued expenses
Answer: B
Q2) What is the overall effect on the statement of financial position when the business sells inventory for a profit of $5 000?
A)Increase total assets $3 000; decrease total equity $3 000
B)Increase total assets $5 000; increase total equity $5 000
C)No change in total assets; no change in total equity
D)None of the above
Answer: B
Q3) What are the possible approaches to presenting a narrative statement of financial position?
A)Entity
B)Proprietary
C)Horizontal
D)Both A and B
Answer: D
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Chapter 3: Measuring and Reporting Financial Performance
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Sample Questions
Q1) The method of inventory valuation that assumes earliest inventory acquired comprises the stock of inventory at the end of the period is the:
A)reducing-balance method.
B)FIFO method.
C)average cost method.
D)LIFO method.
Answer: D
Q2) When equipment accumulates depreciation, it causes:
A)equity to decrease and expenses to increase.
B)assets to increase and liabilities to increase.
C)assets to decrease and expenses to increase.
D)assets to decrease and revenues to decrease.
Answer: C
Q3) Under accrual accounting, profit is measured as:
A)income minus expenses.
B)assets minus liabilities.
C)sales minus cost of sales.
D)cash sales minus payments for expenses.
Answer: A
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Page 5
Chapter 4: Recording Transactionsthe Journal and Ledger Accounts
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Sample Questions
Q1) When the owner of a business withdraws money from the business for her own use:
A)the cash account is debited.
B)the cash account is credited.
C)the drawings account is credited.
D)the equity account is credited.
Q2) An account used to calculate gross profit on trading, prior to the profit and loss account is a/an ________ account.
A)cost of sales
B)inventory
C)contra
D)trading
Q3) Which of the accounts listed below would be increased with a debit entry?
A)Loans
B)Equity
C)Vehicle
D)Sales
Q4) On the worksheet, a loss would appear as a credit in the profit and loss columns.
A)True
B)False
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Chapter 5: Accounting Systems and Internal Control
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Sample Questions
Q1) Which of the following would not be included in a good recording system?
A)A well thought out chart of accounts
B)A method of cross-referencing transactions
C)The elimination of subsidiary records
D)A well-developed system of ledger accounts
Q2) Which of the following would not be a prime document for the cash receipts journal?
A)Invoices
B)Receipts
C)Bank statements
D)Credit card receipt summaries
Q3) Which of the following is not a name used to describe the subsidiary record in which credit transactions are usually first recorded?
A)Journal
B)Book of original entry
C)Ledger
D)Day book
Q4) Subsidiary records are not part of the double-entry accounting system.
A)True
B)False
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Chapter 6: Introduction to Limited Companies
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Sample Questions
Q1) Which is the highest level of control in a company?
A)Board of directors
B)Chief financial officer
C)Executive officer
D)Chief accountant
Q2) Which of the following is not a rule in the framework used for monitoring and controlling the behaviour of company directors?
A)Subjectivity
B)Disclosure
C)Fairness
D)Accountability
Q3) A share issue where the company gives existing shareholders the first right of refusal of the issue is:
A)an ordinary issue.
B)a bonus issue.
C)a rights issue.
D)a preference issue.
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Chapter 7: Regulatory Framework for Companies
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Sample Questions
Q1) The price at which one operating segment of a business sells goods to another operating segment of the same business is the:
A)segment price.
B)trading price.
C)transfer price.
D)inter-segment price.
Q2) A public company is a:
A)reporting entity.
B)disclosing entity.
C)Both A and B
D)Neither A nor B
Q3) Which of the following is included in the statement of changes in equity?
A)Share issues
B)Changes to reserves
C)Changes to retained profits
D)All of the above
Q4) Three key groups associated with companies are directors, shareholders and auditors. a. Explain the relationship between these three groups.
B. Define a reporting entity and a disclosing entity.
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Chapter 8: Measuring and Reporting Cash Flows
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Sample Questions
Q1) Wages expense in the income statement is $58 250 with the statement of financial position at the end of the year showing accrued wages of $2 000. If there were no accrued wages at the beginning of the period, how much was paid out in cash for wages during the year?
A)$54 250
B)$56 250
C)$2 000
D)$58 250
Q2) Which of the three main financial statements was chronologically the last to be required to be included as part of the external financial reports?
A)Statement of comprehensive income
B)Statement of financial position
C)Statement of cash flows
D)None, all three reports have always been required to be included in external financial reports
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10
Chapter 9: Corporate Social Responsibility and Sustainability Accounting
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Sample Questions
Q1) What is the accounting standard on corporate social responsibility in Australia?
A)AASB 111
B)AASB 101
C)AASB 110
D)There is no Australian standard on corporate social responsibility.
Q2) Which of the following statements is not correct?
A)Social and environmental concerns now have to be taken seriously by business.
B)It is no longer sufficient for business to be focused solely on the maximisation of wealth.
C)All businesses currently accept that sustainability is the primary goal.
D)There is increasing pressure for management to address a much broader range of issues than in the past.
Q3) Which of the following statements is incorrect?
A)All stakeholders have an equal interest in a business.
B)Some stakeholders have legitimate interests in only a part of a business.
C)Environmentalists are seen as relatively 'new' stakeholders in business.
D)All of the above are incorrect.
Q4) Briefly outline the essence of the balance scorecard approach.
Page 11
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Chapter 10: Analysis and Interpretation of Financial Statements
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Sample Questions
Q1) The current market price of Fixit Ltd's ordinary shares is $5.00 each. If the latest earnings per share is $0.50, the company's price-earnings ratio is:
A)10 times.
B)2.0 times.
C)2.5 times.
D)20 times.
Q2) The price-earnings ratio per ordinary share is:
A)1.8:1
B)7.2:1
C)5.0:1
D)3.0:1
Q3) If Line Ltd has a current ratio of 2.5:1 and current assets are $600 000, how much are the company's current liabilities?
A)$240 000
B)$300 000
C)$360 000
D)$200 000
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Page 12
Chapter 11: Costvolumeprofit Analysis and Relevant Costing
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Sample Questions
Q1) The organisation more likely to be highly operationally geared is:
A)internet service provider.
B)vehicle manufacturer.
C)takeaway food outlet.
D)hairdresser.
Q2) The term 'relevant range' means the range:
A)over which costs are relevant.
B)of activity within which an entity would normally operate.
C)where the firm will break-even.
D)over which the firm has a margin of safety.
Q3) Refer to the table above. Management is contemplating closing the Holiday Packages service; this would involve a cost saving of $40 000 per annum, namely, the variable costs. The fixed costs are not expected to change. The best advice to management is:
A)close the service, and the business would make a profit of $110 000.
B)do not close the service, because profit would decrease by $60 000.
C)close the service and save $40 000.
D)do not close the service, because profit would decrease by $90 000.
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Chapter 12: Full Costing
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Sample Questions
Q1) What is the difference between selling price and profit?
A)Direct cost
B)Full cost
C)Variable cost
D)Fixed cost
Q2) Refer to the table above. Total budgeted direct costs for the year are:
A)$350 000
B)$340 000
C)$375 000
D)$300 000
Q3) Refer to the table above. The total direct costs incurred in erecting the 4 000 metres of fencing is:
A)$11 000
B)$9 000
C)$9 500
D)$10 000
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Chapter 13: Planning and Budgeting
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Sample Questions
Q1) Which of these involve a projection of future cash receipts and cash disbursements?
A)Cash budget
B)Statement of comprehensive income
C)Statement of financial position
D)None of the above
Q2) Which statement is not correct?
A)The existence of budgets tends to provide motivation to improve performance.
B)The 'top down' approach to budgeting tends to improve motivation.
C)Setting demanding, but achievable, targets is a better motivator than setting undemanding targets.
D)Unrealistic targets have adverse effects on managers' performance.
Q3) The expense that does not appear in a cash budget is:
A)rent.
B)wages.
C)supplies.
D)taxation provided.
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Chapter 14: Capital Investment Decisions
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Sample Questions
Q1) Which of the following is not a method for appraising potential investments?
A)Payback method
B)Return on assets
C)Accounting rate of return
D)Net present value
Q2) The required rate of return is the ________ acceptable percentage return on an investment after taking into account the ________ of the investment.
A)minimum; opportunity cost
B)maximum; opportunity cost
C)maximum; risk
D)minimum; risk
Q3) What is the formula for net present value per $1 of investment?
A)Net Present Value/Investment
B)Net cash flows/ Investment
C)Present value of inflows/Initial investment
D)Present values of inflows/Present value of outflows
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